## 1fjiea2025001-print-pdf ## Source details **Canonical URL:** [1fjiea2025001-print-pdf](https://www.imf.org/-/media/files/publications/cr/2025/english/1fjiea2025001-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1fjiea2025001-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1fjiea2025001-print-pdf.pdf.json) --- ### Executive Board assessment and outlook - Economy recovering from the pandemic but facing new setbacks. - Growth projections (Staff projection: Real GDP growth): - 2024: 3.7 - 2025: 2.6 - 2026: 2.8 - 2027: 3.2 - 2028–2030: 3.2 each year - Outlook and risks: - Growth expected to fall in 2025, to about 2.6 percent, and to take a couple of years to recover to its medium-term potential rate. - Balance of risks mostly to the downside in the near term (e.g., if trade tensions worsen) and over the medium term (vulnerabilities to natural disasters). - Growth would be higher with successful structural reforms or a more favorable external environment. ### Key recent developments and macro outcomes - Inflation and monetary stance: - Consumer prices (average): 2023: 2.3; 2024: 4.5; 2025 (proj): 3.2. - Central Bank Policy rate (end of period): 2022: 0.25; 2023: 0.25; 2024: 0.25. - Inflation decelerated sharply in 2024 as the impact of the 2023 VAT hike faded. - Fiscal outcomes: - Overall balance (central government, percent of GDP on fiscal-year basis): FY2023: -7.2; FY2024: -3.5; FY2025 (proj): -4.4. - Primary balance: 2023: -3.3; 2024: 0.5; 2025 (proj): -0.3. - Central government debt (percent of GDP): 2022: 90.4; 2023: 83.3; 2024: 79.5; 2025 (proj): 77.7; 2030 (proj): 76.8. - The overall deficit declined from 7.2 percent of GDP in FY2023 (August-July) to 3.5 percent of GDP in FY2024, compared to a budgeted deficit of 4.8 percent of GDP. - External sector: - Current account balance (percent of GDP): 2023: -7.7; 2024: -6.7; 2025 (proj): -7.0; 2026 (proj): -7.7. - Trade balance (percent of GDP): 2024: -30.0; 2025 (proj): -29.1. - Services balance (percent of GDP): 2024: 20.0; 2025 (proj): 19.9. - Gross official reserves (in months of prospective imports): 2022: 5.5; 2023: 5.3; 2024: 5.2; 2025 (proj): 4.4; 2026 (proj): 3.7; 2027 (proj): 3.1; 2028 (proj): 2.9; 2029 (proj): 2.6; 2030: ... - Staff estimates current account improved from -7.7 percent of GDP in 2023 to -6.7 percent of GDP in 2024. - Money and credit (percent change): - Claims on private sector: 2022: 6.7; 2023: 7.5; 2024: 11.4; 2025 (proj): 10.0. - Broad money (M3): 2022: 5.1; 2023: 9.1; 2024: 6.6; 2025 (proj): 4.1. - Memoranda: - GDP at current market prices (FJD millions): 2024: 13,494; 2025 (proj): 14,286; 2030 (proj): 19,594. - GDP at current market prices (USD millions): 2024: 5,949; 2025 (proj): 6,257; 2030 (proj): 8,089. - GDP per capita (USD): 2024: 6,447; 2025 (proj): 6,740; 2030 (proj): 8,508. ### Policy recommendations and priorities - Fiscal policy: - Rebuilding fiscal buffers should be a priority, with growth-friendly consolidation promoting a shift from current to capital spending. - Additional adjustment measures are needed to put public debt on a clear downward path. - Use targeted and temporary social protection measures to protect the vulnerable. - Fiscal tightening would also contribute to reducing external imbalances. - Monetary and exchange rate policy: - Gradually tighten monetary conditions over the medium term, raising the policy rate and reducing excess liquidity. - Monetary policy should be gradually adjusted to at least neutral levels and exchange restrictions phased out. - Financial sector policy: - Be attentive to emerging credit risks and safeguard against money laundering risks. - Avoid using exchange rate restrictions and CFMs in place of macroeconomic adjustment; pursue a gradual, sequenced capital account liberalization. - Structural reforms and resilience: - Address ageing infrastructure in electricity, water, and waste utilities; improve transport network and digital connectivity; strengthen training and human capital. - Increase resilience to natural disasters and mobilize additional climate financing. - A significant increase in reform momentum is needed; political consensus and good governance are necessary. - Governance: - Implement institutional reform, strengthen rule of law, and reduce corruption and bribery; recent legislative progress needs enforcement and capacity-building in the civil service. ### Tariff shock: Annex I — Assumptions, impacts, and scenarios - Tariff announcements and baseline assumptions: - On April 2, 2025, the US administration announced tariffs of 32 percent on goods exports. - On April 9, 2025, a 90 day “pause” was announced, during which the tariff rate would be 10 percent. - Projections in this Staff Report are based on announced policies as of April 2, 2025: tariff rate on Fijian goods exports to the US assumed to be 32 percent through the projection period; policy rates assumed to remain at current levels; current exchange restrictions and CFMs remain in place; fiscal outlook broadly unchanged; structural reforms progress gradually. - Exposure and transmission: - Goods exports represented 20 percent of nominal GDP in 2024. - The US accounted for 20 percent (FJD 467 million) of goods exports—implying 4 percent of GDP would be subject to tariffs by the US. - Two thirds of US-bound goods exports were mineral water; agricultural and horticultural goods were next. - Gross tourism receipts were about 40 percent of GDP in 2024; visitor shares by market: Australia 46 percent, New Zealand 23 percent, US 11 percent. - Quantified growth impacts: - Direct effects of US tariffs lower growth by about 0.2 percentage points in 2025. - Indirect effects (mainly via slower tourism and weaker remittances) lower growth by about 0.2 percentage points in 2025. - Staff estimate: direct and indirect effects would likely subtract about 0.4 percentage points from growth in the near term. - Baseline AIV growth and revised paths (selected Annex I table entries preserved): - AIV baseline growth rate (row 1): 2024 = 3.7, 2025 = 3.0, 2026 = 3.2, 2027 = 3.2. - Revised growth (row 12): 2024 = 2.6, 2025 = 2.8, 2026 = 3.2. - Revised GDP path (row 13): 2024 = 100, 2025 = 102.6, 2026 = 105.5, 2027 = 108.8. - Breakdown of near-term impact: - Direct effect loss ≈ 0.2 percentage points of growth in 2025. - Indirect effect loss ≈ 0.2 percentage points of growth in 2025. - Combined, the revised path is 0.4 percentage points lower in 2025 and 2026, returning to potential growth by 2027. - Path implies a cumulative output loss of about 1 percentage point by 2027. - Scenario risk and uncertainty: - Downside: growth in 2025 could fall to about 1¾ percent in one downside scenario if tariffs’ effects on trading partner growth and transmission to demand for Fiji’s exports are stronger than assumed; more elastic responses or larger income effects could reduce growth by about another 0.4 percentage point in 2025. - Upside: easing tariff tensions could raise growth back to the “pre-tariff” projection of 3.0 percent for 2025. - Policy responses recommended for tariff shock: - Targeted fiscal support to most-affected groups while watching public debt sustainability. - Seek official financing for additional financing needs. - Fiscal consolidation and tightening of monetary conditions to support FX reserve accumulation and external stability. - Policies to foster export diversification and productivity-raising private investment. ### Fiscal projections, debt dynamics, and DSA highlights (Annex IV) - FY2025 budget and staff fiscals: - FY2025 budget envisages a deficit of 4.5 percent of GDP; Staff projects 4.4 percent of GDP for FY2025. - FY2025 budget includes a pay increase for civil servants (about 0.6 percent of GDP) and net revenue impact from changes to departure taxes and customs and excise duties of 0.2 percent of GDP. - Staff recommends reverting to a tightening stance starting in FY2026 and advises against reversing recent tax increases. - Staff recommends achieving a primary surplus of around 2 percent of GDP by FY2030; this would require about 2⅓ percent of GDP in additional revenue and expenditure measures (about 1 percent of GDP above the authorities’ targets) over the next five years. - Assuming a multiplier of 0.5, this would imply 1 percentage point reduction in cumulative growth, all else equal, over five years. - DSA baseline public debt projections (Annex IV. Table 3): - Public debt (percent of GDP): Actual 2024: 79.2; 2025: 78.5; 2026: 78.6; 2027: 78.3; 2028: 78.0; 2029: 77.6; 2030: 77.3; 2031: 76.7; 2032: 76.1; 2033: 75.5; 2034: 74.9. - Change in public debt: 2024: -2.0; 2025: -0.7; 2026: 0.0; 2027: -0.3; 2028: -0.3; 2029: -0.4; 2030: -0.3; 2031: -0.6; 2032: -0.6; 2033: -0.6; 2034: -0.6. - Gross financing needs (percent of GDP): 2024: 7.9; 2025: 8.1; 2026: 7.6; 2027: 7.1; 2028: 7.4; 2029: 7.8; 2030: 7.6; 2031: 6.6; 2032: 6.4; 2033: 6.6; 2034: 6.9. - Debt service (percent of GDP): 2024: 8.0; 2025: 7.8; 2026: 7.1; 2027: 6.5; 2028: 6.8; 2029: 7.1; 2030: 6.8; 2031: 5.8; 2032: 5.6; 2033: 5.8; 2034: 6.0. - Debt coverage and structure: - Perimeter: central government. - As of end-FY2024: nearly two-thirds of public debt is held domestically. - Domestic public debt concentration: FNPF: 65 percent; insurance companies: 14.1 percent; Reserve Bank of Fiji: 10.8 percent; commercial banks: 8.5 percent. - Stated average term to maturity: 11.7 years. - DSA risk assessment: - IMF DSA assesses the risk of debt distress to be “moderate” for Fiji. - Debt fanchart module: Value: 76.6; Contribution: 1.1; Fanchart width: 41.1; Probability of debt non-stabilization: 0.3 percent; Debt fanchart index (DFI): 2.4; Risk signal: High. - GFN financeability index (GFI): 4.3; Risk signal: Low. - Final assessment: Moderate risk. - Contingent liabilities: - Government guarantees to SOEs: 7.7 percent of GDP. - Other explicit and implicit contingent liabilities: 4.9 percent of GDP. ### Monetary policy, exchange rate peg, and financial sector - Exchange rate regime and monetary policy: - Fiji’s exchange rate peg continues to provide an effective nominal anchor. - The RBF has maintained the policy rate at 0.25 percent since early 2020. - Staff recommendation: gradually raise the policy rate to at least a neutral level and mop up excess liquidity. - Practical guide: gradually move the policy rate to zero in real terms—about 4 percent in nominal terms. - Projections of declining FX reserve coverage imply the nominal exchange rate would come under pressure without improvements in current and/or financial account balances. - Monetary operations and instruments: - The link between the policy rate and retail rates is loose and largely untested. - RBF uses the statutory reserves deposit (SRD) rate, currently set at 10 percent, as a liquidity tool. - Increasing the SRD rate would reduce available loanable funds but is less precise than conventional operations. - Financial sector indicators and soundness: - Banking sector profitability and solvency: commercial banks have asset returns of 2.5 percent and return on equity of 16.5 percent. - NPL ratio: 3.5 percent in 2024 (lowest level in three years). - System-wide Capital Adequacy Ratio (CAR) around 17 percent in recent years; all commercial banks above the 12 percent regulatory requirement. - Banking sector ratios (selected 2024 values preserved): Capital Adequacy (Risk Weighted CAR) = 16.9; Tier 1 Capital to RWA = 14.1; NPLs to Total Loans = 3.5; Provision to NPLs = 33.3; Return on Assets = 2.4; Return on Equity = 21.2. - Liquidity and macroprudential tools: - RBF plans to raise the Liquidity Coverage Ratio (LCR) from 60 to 100 percent over the next 4 years. - Complementing LCR with a Net Stable Funding Ratio (NSFR) could be considered. - Financial sector infrastructure, AML/CFT, and inclusion: - RBF integrated Mobile Network Operators into central infrastructure enabling full interoperability for account-based transfers between banks and digital wallets. - Cabinet approved an e-KYC functionality project; registration expected to commence in June 2026. - Remaining AML/CFT challenges: beneficial ownership, use of financial intelligence, and risk-based supervision in the banking sector. ### Structural policies, resilience to natural disasters, and implementation priorities - National Development Plan (NDP) targets and dependencies: - NDP aims include achieving GDP growth of 5 percent within the next five years and diversifying the economy; success depends on implementation, financing, and administrative capacity. - Staff-assessed structural priorities: - Address ageing infrastructure in electricity, water, and waste utilities; review water and electricity tariff rates to ensure cost recovery. - Facilitate renewable energy installation and target all electricity generation from renewable sources by 2030. - Improve transport network and digital connectivity to support tourism, agriculture, and diversification (e.g., BPO/KPO sectors). - Mitigate migration and skilled labor shortages via human capital investment, higher female labor force participation, affordable childcare, and flexible work arrangements. - Improve land leasing arrangements to realize economies of scale and higher domestic value-added in tourism and agriculture. - Climate and disaster risks: - IMF research suggests natural disasters could subtract around 0.2 percentage point each year from Fiji’s annual GDP growth. - Sea level rise scenarios could range between 0.5 and 1 meter over the course of the century; planned retreat from the coastline may be most cost-effective. - The 2022 National Climate Finance Strategy estimates about FJD 4.3 billion over ten years to strengthen resilience of transport infrastructure. - Estimated annual adjustment to real GDP growth projections from disasters: 0.13-0.22 ppts. - Cumulative national income estimated to be about 6 percent lower after 30 years than without regular setbacks from natural disasters. - Implementation and planning: - NDP implementation booklets (IBs) drafted across forty-five government agencies; mid-term review planned for July 2026. - Infrastructure priorities: flood alleviation, energy efficiency, road and bridge networks, wastewater management, and health facilities. - Authorities considering public-private partnerships and strategic procurement planning; combined project proposals exceeding FJD 50 million are being developed to reduce administrative costs. - Authorities report forty-three communities have requested relocation, with seventeen on a priority list and two being relocated. ### Governance, legislative reform, and capacity building - Legislative reform and anti-corruption: - Bills submitted include a Code of Conduct bill, an Accountability and Transparency Commission bill (including whistleblower protection), and a Freedom of Information bill. - Key provisions: declaration of assets by public officials; creation of an asset register; disclosure of government information on request. - FICAC priorities: enhanced screening, selectivity in investigations, focus on most serious cases. - Capacity building priorities: - Main capacity challenge: lack of capacity due in part to rapid turnover of staff. - Recent Fund technical assistance focused on national accounts, price and external sector statistics, forecasting and policy analysis system at the RBF, and revenue administration. - Priority areas for further improvements: public financial management; public investment management; tax policy and administration; debt sustainability; monetary operations; financial sector supervision; quality of CPI, fiscal and external sector data; developing quarterly national accounts; increasing Fiji Bureau of Statistics capacity. - Implementation progress (selected): - Some progress on comprehensive tax reform, reorientation of expenditure toward social protection and infrastructure, improving PFM and fiscal transparency, strengthening financial regulation and supervision, and enhancing financial inclusion. ### IMF engagement and capacity development (CD) - IMF engagement will encompass both surveillance and capacity development to support authorities’ priorities and coordinate with development partners (WB, ADB). - Key thematic areas: Potential growth, Fiscal policy, Monetary policy and financial supervision, Climate adaptation and mitigation, and Data. - Data and statistical CD priorities: - Revise CPI basket and update weights; enhance deflator methodology. - Expand GFS and public sector debt coverage; update Chart of Accounts mapping to align with international standards. - Consider developing quarterly GDP data. - Address CPI shortcomings: absence of core CPI and lack of breakdown between local and imported inflation; CPI weights based on 2014 data. - Improve timeliness of national accounts and mitigate balance of payments net errors and omissions. ### Risks, scenarios, and staff judgments - Baseline scenario: public debt would remain elevated and FX reserve coverage would fall, leaving the external position moderately weak. - EBA-Lite current account model applied to 2024 suggests Fiji’s external position in 2024 was broadly in line with fundamentals and desirable policy settings, but NIIP substantially negative and reserve coverage projected to fall steadily. - Annex I judgment: staff applies a persistent-level judgment shock for 2026–27 to account for global trade uncertainty and production/capital reallocation. - Uncertainty and downside risks: - Near-term downside from global economic deterioration and escalation of trade frictions. - Medium-term vulnerability from natural disasters. - Small changes in assumptions about current account and financial inflows could yield significant changes in reserve outlook. - Contingent liabilities and stress: - Government guarantees to SOEs: 7.7 percent of GDP; other contingent liabilities: 4.9 percent of GDP. - Stress scenarios (including natural disasters and contingent liabilities) notably impact gross financing needs and debt-to-GDP ratio. *Source: FIJI — STAFF REPORT FOR THE 2025 ARTICLE IV CONSULTATION (content as provided).* ### 7.2 percent of GDP in FY2023 (August-July) to 3.5 percent of GDP in FY2024, compared to a ### 1fjiea2025001-print-pdf - 7.2 percent of GDP in FY2023 (August-July) to 3.5 percent of GDP in FY2024, compared to a ### Executive Board assessment and outlook - Economy recovering from the pandemic but facing new setbacks. - Growth projections and path: - Growth is expected to fall in 2025, to about 2.6 percent. - Growth to take a couple of years to recover to its medium-term potential rate. - Staff projection: Real GDP growth — 2024: 3.7; 2025: 2.6; 2026: 2.8; 2027: 3.2; 2028–2030: 3.2 each year. - Risks: - Balance of risks mostly to the downside in the near term (e.g., if trade tensions worsen) and over the medium term (vulnerabilities to natural disasters). - Growth would be higher with successful structural reforms or a more favorable external environment. ### Key recent developments and macro outcomes - Inflation and monetary stance: - Inflation decelerated sharply in 2024 as the impact of the 2023 VAT hike faded. - Consumer prices (average): 2023: 2.3; 2024: 4.5; 2025 (proj): 3.2. - Central Bank Policy rate (end of period): 2022: 0.25; 2023: 0.25; 2024: 0.25. - Fiscal outcomes: - Overall balance (central government, percent of GDP on fiscal-year basis): FY2023: -7.2; FY2024: -3.5; FY2025 (proj): -4.4. - The overall deficit declined from 7.2 percent of GDP in FY2023 (August-July) to 3.5 percent of GDP in FY2024, compared to a budgeted deficit of 4.8 percent of GDP. - Primary balance: 2023: -3.3; 2024: 0.5; 2025 (proj): -0.3. - Central government debt (percent of GDP): 2022: 90.4; 2023: 83.3; 2024: 79.5; 2025 (proj): 77.7; 2030 (proj): 76.8. - External sector: - Current account balance (percent of GDP): 2023: -7.7; 2024: -6.7; 2025 (proj): -7.0; 2026 (proj): -7.7. - Trade balance (percent of GDP): 2024: -30.0; 2025 (proj): -29.1. - Services balance (percent of GDP): 2024: 20.0; 2025 (proj): 19.9. - Gross official reserves (in months of prospective imports): 2022: 5.5; 2023: 5.3; 2024: 5.2; 2025 (proj): 4.4; 2026 (proj): 3.7; 2027 (proj): 3.1; 2028 (proj): 2.9; 2029 (proj): 2.6; 2030: ... - Staff estimates current account improved from -7.7 percent of GDP in 2023 to -6.7 percent of GDP in 2024. - Money and credit (percent change): - Claims on private sector: 2022: 6.7; 2023: 7.5; 2024: 11.4; 2025 (proj): 10.0. - Broad money (M3): 2022: 5.1; 2023: 9.1; 2024: 6.6; 2025 (proj): 4.1. - Other memoranda: - GDP at current market prices (in millions of Fiji dollars): 2024: 13,494; 2025 (proj): 14,286; 2030 (proj): 19,594. - GDP at current market prices (in millions of U.S. dollars): 2024: 5,949; 2025 (proj): 6,257; 2030 (proj): 8,089. - GDP per capita (in U.S. dollars): 2024: 6,447; 2025 (proj): 6,740; 2030 (proj): 8,508. ### Policy recommendations and priorities - Fiscal policy: - Rebuilding fiscal buffers should be a priority, with growth-friendly consolidation promoting a shift from current to capital spending. - Significant progress achieved, but additional adjustment measures are needed to put public debt on a clear downward path. - Targeted and temporary social protection measures should be used to protect the vulnerable. - Fiscal tightening would also contribute to reducing external imbalances. - Monetary and exchange rate policy: - Over the medium term, given potential pressures on the exchange rate peg, monetary conditions should be gradually tightened, raising the policy rate and reducing excess liquidity. - Monetary policy should be gradually adjusted to at least neutral levels and exchange restrictions phased out. - Financial sector policy: - Financial policy should be attentive to emerging credit risks and safeguard against money laundering risks. - Authorities should avoid using exchange rate restrictions and CFMs in place of macroeconomic adjustment and focus on a gradual, sequenced capital account liberalization to support high long-run growth objectives. - Structural reforms and resilience: - Raising potential growth calls for sustained structural reforms: address ageing infrastructure in electricity, water, and waste utilities; improve the transport network and digital connectivity; and strengthen training and human capital. - Increasing resilience to natural disasters and mobilizing additional climate financing is critical. - A significant increase in reform momentum is needed to boost medium-term growth; political consensus and good governance are necessary to sustain reforms. - Governance: - Government recognition of institutional reform, commitment to the rule of law, and reducing corruption and bribery is welcome. - Recent legislative progress needs proper enforcement and addressing capacity constraints in the civil service. ### Selected scenarios, staff judgments, and analytical notes - Baseline scenario implies public debt would remain elevated and FX reserve coverage would fall, leaving the external position moderately weak. - EBA-Lite current account model applied to 2024 suggests Fiji’s external position in 2024 was broadly in line with fundamentals and desirable policy settings, but NIIP is substantially negative and reserve coverage is projected to fall steadily over the projection horizon. - The outlook is very uncertain: near-term downside risks from global economic deterioration; long-term vulnerability from natural disasters; upside if structural reforms accelerate. *Source: FIJI — STAFF REPORT FOR THE 2025 ARTICLE IV CONSULTATION (projections finalized on April 2, 2025; mission dates March 12–25, 2025 with virtual discussions on April 16, 2025).* ### 7. Goods exports to the US face tariffs. On April 2, 2025, the US administration announced ### 1fjiea2025001-print-pdf - 7. Goods exports to the US face tariffs. On April 2, 2025, the US administration announced ### Tariffs and baseline assumptions - On April 2, 2025, the US administration announced tariffs of 32 percent on goods exports. - On April 9, 2025, the administration announced a 90 day “pause”, during which the tariff rate would be 10 percent. - Projections in this Staff Report are based on announced policies as of April 2, 2025, consistent with the April 2025 WEO reference scenario: - The tariff rate on Fijian goods exports to the US is assumed to be 32 percent through the projection period. - Policy rates are assumed to remain at current levels, and current exchange restrictions and capital flow management measures (CFMs) remain in place. - Fiscal outlook is assumed to remain broadly unchanged based on announced policies. - Structural reforms are assumed to progress gradually. ### Growth outlook and transmission channels - Growth projections and key impacts: - Growth would slow in the near term, to 2.6 percent in 2025. - Direct effects of US tariffs on goods exports lower growth by about 0.2 percentage points in 2025. - Indirect effects (mainly via slower growth in tourist arrivals and weaker remittances from neighboring countries, including the US) lower growth by the same amount (0.2 percentage points). - The remaining difference to the 3.7 percent growth in 2024 is mainly because of lower tourism revenues given weakening demand already seen before the April tariffs. - Uncertainty is assumed to drag on growth through 2026 (Annex I). - External shocks are assumed to affect the level of output and not potential growth, which is expected to settle slightly below the pre-pandemic trend of 3.3 percent. - Scenario risk: - In one downside scenario, growth in 2025 could fall to about 1¾ percent if tariffs’ effects on trading partner growth and transmission to demand for Fiji’s exports are stronger than assumed. ### Inflation and exchange rate assumptions - Inflation: - Projections assume inflation is about 3 percent in the near term (compared with an average of 4.5 in 2024). - Over the medium-term, baseline assumptions imply nominal exchange rate depreciation and therefore higher inflation. - About two thirds of items in the CPI basket are imported. - Exchange rate: - The US dollar exchange rate is expected to move in line with Fiji-US inflation differentials and remains constant in real terms. - Monetary conditions: the policy rate is near the zero bound. ### Public debt, fiscal projections, and fiscal risks - Fiscal projections and debt: - Staff projects the overall deficit to remain at above 4 percent of GDP. - Debt-to-GDP ratio is projected to decline only marginally, to around 77 percent by FY2030. - The IMF Debt Sustainability Analysis (DSA) assesses the risk of debt distress to be “moderate” for Fiji. - FY2025 budget: - The FY2025 budget envisages a larger deficit of 4.5 percent of GDP in FY2025. - Staff projects a slightly lower deficit of 4.4 percent of GDP for FY2025, reflecting some under-execution of capital spending. - The FY2025 budget includes a pay increase for civil servants (about 0.6 percent of GDP) and changes to departure taxes and customs and excise duties expected to have a net revenue impact of 0.2 percent of GDP. - Fiscal consolidation and medium-term goals: - Staff recommends reverting to a tightening stance starting in FY2026 and advises against reversing recent tax increases. - Staff recommends achieving a primary surplus of around 2 percent of GDP by FY2030 to put the debt-to-GDP ratio on a clear downward path to below 70 percent. - Achieving that would require about 2⅓ percent of GDP in additional revenue and expenditure measures (about 1 percent of GDP above the authorities’ targets) over the next five years. - Assuming a multiplier of 0.5, this would imply 1 percentage point reduction in cumulative growth, all else equal, over five years. ### External sector and reserves - Current account and reserves: - With the slowdown in tourism earnings, the current account deficit would stabilize over the medium-term at around 7.5 percent of GDP. - FX reserve coverage would decline steadily, falling below the RBF’s own policy of four months of current imports by 2026. - Authorities’ projections point to FX reserves coverage remaining adequate at four months of current imports by 2027. - Trade composition: - The US takes the largest share of Fiji’s exports. - The effects of the tariffs would be felt in weaker goods and services exports, but the effect on net trade is likely to be significantly less owing to the high proportion of imports (e.g., fuel, food and beverages). ### Risks and uncertainty - Overall risk stance: - Projections are unusually uncertain; risks are tilted to the downside. - Risks of escalation of trade frictions and persistent trade policy uncertainty could reduce growth further. - Higher frequency and/or intensity of extreme weather-related events pose a further downside risk to growth. - Other risk channels: - Small changes in assumptions about current account and financial inflows could yield significant changes in the outlook for reserves coverage. - External shocks are assumed to affect the level of output and not potential growth. ### Authorities’ views - The authorities broadly agreed with Staff’s assessment of direct and indirect effects of new tariffs on exports, while noting substantial uncertainty around projections. - The authorities emphasized: - The United States has been an important trade partner and a key development partner for Fiji for the last several decades. - Less than 4 percent of imports from the United States are subject to import duties of 15 or 32 percent, with 72 percent subject to zero import duty. - The importance of export diversification, higher FDI, prudent external borrowing, and sustainable fiscal policies. - Plans to increase spending to support longer-term growth, including on infrastructure, education, and health care, partly financed by borrowing (including via official concessional financing). - Plans to streamline financial and operational processes for capital projects, and to introduce a fiscal framework including legislative provisions and quantitative fiscal anchors. ### Policy discussions and recommendations - Macro and structural priorities: - Continue growth-friendly fiscal consolidation oriented toward capital spending to reduce public debt and rebuild fiscal space. - Promote a gradual, sequenced capital account liberalization to attract foreign investment and support high long-run growth objectives; CFMs are not the appropriate tool to shield against persistent external shocks. - Structural policies should be directed to raising potential growth, ease labor shortages, raise human capital, encourage investment, and reduce “brain drain.” - Financial policy should be attentive to emerging credit risks and to safeguard against money laundering risks. - Should a downside growth scenario materialize, use targeted and time-bound social protection measures financed within the budget. - Specific fiscal measures recommended: - Revenues: - Further remove or rationalize tax incentives and exemptions for corporates, including tax holidays. - Phase out the export income deduction gradually. - Re-introduce the dividend tax and streamline personal income tax brackets, lowering the initial threshold back to FY2018 levels. - Gradually reduce zero-rated and exempted VAT items and over time move to a single VAT rate. - Increase taxes on environmental externalities, such as by increasing the excise on diesel and heavy fuel oil. - Budget and report tax expenditures on incentives and exemptions to promote transparency. - Gradual implementation of revenue measures could yield at least 1.25 percent of GDP in additional tax revenues, based on IMF technical assistance estimates. - Current expenditure: - Limit further increases in current spending as a share of GDP by enhancing efficiency and containing the size of government. - Streamline services across ministries, increase efficiency via digitalization, and seek technical support to contain the wage bill and improve service delivery. - Change the legal status of the Water Authority of Fiji to a corporate entity and rationalize subsidies and lending to under-performing SOEs. - Improve coverage and targeting of social protection by updating the proxy means test and streamlining spending toward the most effective programs. - Capital expenditure: - Improve infrastructure by identifying priority projects, implementing multi-year budgeting and reporting of maintenance and total project costs, strengthening project appraisal guidelines, and implementing a project portfolio management system. - Fiscal framework: - Introduce a quantitative fiscal anchor, such as debt-to-GDP, and a fiscal rule (primary balance or overall balance) in the budget law with well-specified escape clauses and correction mechanisms. - Monetary and exchange rate policy recommendations: - CFMs and exchange restrictions should be eased; they are not substitutes for adequate macroeconomic policies. - Authorities should continue to raise limits on large payments toward pre-pandemic levels and phase out exchange restrictions related to tax clearance certificates. - Develop a sequenced plan to fully remove the exchange restriction related to limits on large payments, in line with Article VIII obligations. - Given potential pressures on the exchange rate peg, monetary conditions should be gradually tightened over the medium term. - Easing monetary policy would likely have little benefit to growth; benefits to exports from an exchange rate devaluation would likely be outweighed by costs to standards of living from higher prices. _Italic: Source: Staff Report (content as provided)._ ### 22. Fiji’s current exchange rate peg continues to provide an effective nominal anchor to ### Fiji’s current exchange rate peg continues to provide an effective nominal anchor to ### Exchange rate regime and monetary policy - Fiji’s exchange rate peg provides an effective nominal anchor; periodic assessment of the exchange rate regime and composition of the currency basket is recommended. - Maintaining the peg requires a consistent macroeconomic policy framework, including fiscal and monetary policy. - Monetary policy specifics: - The RBF has maintained the policy rate at 0.25 percent since early 2020. - Projections of declining FX reserve coverage imply the nominal exchange rate would come under pressure without improvements in the current and/or financial account balances. - Staff recommendation: gradually raise the policy rate to at least a neutral level and mop up excess liquidity. - A practical guide: gradually move the policy rate to zero in real terms—about 4 percent in nominal terms. - Expected benefits: enhance the external position, bolster foreign exchange reserves, and increase resilience against shocks. - Monetary operations: - The link between the policy rate and retail rates is loose and largely untested. - To improve control over monetary conditions and withdraw excess liquidity, the RBF needs to bolster capacity to conduct monetary operations. - IMF technical assistance could be provided on open market operations and estimating liquidity needs. - Operational instruments: - The RBF has actively used the statutory reserves deposit (SRD) rate, currently set at 10 percent, as a liquidity tool. - Increasing the SRD rate would reduce available loanable funds but is less precise than conventional monetary operations. ### Authorities’ views on exchange rate and monetary policy - Authorities intend to gradually ease exchange restrictions and CFMs but are concerned that proceeding too rapidly, before FDI increases, could reduce stability and exacerbate FX reserve coverage risks. - Authorities note existing controls have not been a significant deterrent to FDI; RBF approves international payments or repatriation requests, albeit with a lag to minimize market volatility. - While broadly agreeing on the policy direction, authorities consider the current stance appropriate for now: - The current low-interest rate environment is seen as ensuring affordable borrowing to foster investment and business activity. - Authorities recognize inflationary pressures, citing VAT adjustments and largely external drivers such as rising import costs. - The RBF expects to meet its primary objectives of price stability and foreign reserves adequacy in the near term and notes Q1 2025 data indicate weaker-than-expected activity, supporting maintenance of current settings to avoid premature tightening. - The Ministry of Finance is more optimistic on the balance of payments outlook; the RBF emphasizes the importance of fiscal consolidation to keep planned capital outlays compatible with foreign reserves adequacy. ### Financial sector policies — key findings and recommendations - Sector health: - The banking sector is profitable and solvent. - Commercial banks have asset returns of 2.5 percent and a return on equity of 16.5 percent. - The NPL ratio was 3.5 percent in 2024, its lowest level in three years. - Liquid asset metrics are relatively high; few signs of maturity or exchange rate mismatches. - Interest rate margin ratios have been falling but the numerator has not decreased, consistent with competition in lending. - Capital and solvency: - System-wide Capital Adequacy Ratio (CAR) increased during the COVID-19 pandemic, then declined to around 17 percent over the past two years. - All commercial banks have CARs well above the 12 percent regulatory requirement. - Credit growth and risks: - Recent increase in credit growth does not appear to reflect widespread relaxation of lending standards. - A zero-deposit home loan product is confined to specific loans with tight eligibility; the RBF requires all lending products to be cleared before market launch. - Growth in unsecured consumer credit warrants close monitoring. - High reliance on deposit funding raises potential liquidity risks in case of unexpected cash outflows. - Liquidity and macroprudential tools: - The RBF plans to gradually increase the required Liquidity Coverage Ratio (LCR) and staff note complementing the LCR with a Net Stable Funding Ratio (NSFR) could be considered. - The RBF plans to raise the LCR from 60 to 100 percent over the next 4 years. - Structural and legal recommendations: - Authorities should expedite addressing the 2018 Financial Sector Stability Review recommendations, including updates to the RBF and Fiji Banking Acts and expanding RBF supervision to non-bank financial institutions (credit unions and the House Authority). ### Financial sector infrastructure, AML/CFT, and inclusion - Infrastructure and inclusion: - RBF integrated Mobile Network Operators into central infrastructure enabling full interoperability for account-based transfers between banks and digital wallets, and between wallets. - Cabinet approved an e-KYC functionality project to establish a secure National ID program; registration expected to commence in June 2026. - Authorities are developing a national FinTech Strategy, supported by a landscape assessment and external assistance. - AML/CFT progress and gaps: - Authorities implemented measures to meet remaining FATF recommendations, including a banking sector risk assessment; an update of the 2015 National Risk Assessment will be completed by mid-year. - Key officials have received training with APG technical assistance; Fiji’s next APG Mutual Evaluation is scheduled for 2026. - FIU issued guidance on customer due diligence for digital identification systems. - Remaining challenges: deficiencies in beneficial ownership, use of financial intelligence, and risk-based supervision in the banking sector. ### Authorities’ views on financial sector outlook and supervision - Authorities will maintain close supervision and monitoring and are optimistic about business confidence, projected credit demand, and continued decline in NPLs. - The RBF’s Macroprudential Surveillance Report indicates credit risk assessments do not currently require policy intervention. - Authorities view a licensed credit reporting agency as supportive of loan growth; application of lending standards and borrower quality will be important to monitor as lenders expand loan books. ### Structural policies and building resilience to natural disasters - National Development Plan (NDP) targets and dependencies: - NDP aims include achieving a GDP growth rate of 5 percent within the next five years, diversifying the economy, investing in people and infrastructure, and improving governance. - Success depends on implementation, securing financing, and enhancing administrative capacity. - Near-term business environment improvements: - Online system to process worker and investor permits within thirty days; updating the 2003 Immigration Act could help address skilled labor needs. - Developing a centralized digital portal for new business registration and enhancing the National Single Window for permit approvals. - Staff-assessed structural policy priorities: - Address ageing infrastructure in electricity, water, and waste utilities; review water and electricity tariff rates to ensure cost recovery and unlock financing. - Facilitate renewable energy installation and target all electricity generation from renewable sources by 2030. - Improve transport network and digital connectivity (roads, bridges, digital) to support tourism, agriculture, and diversification (e.g., BPO/KPO sectors). - Mitigate migration and skilled labor shortages via human capital investment, education and training, higher female labor force participation, affordable childcare, and flexible work arrangements. - Improve land leasing arrangements to realize economies of scale and higher domestic value-added in tourism and agriculture. - Climate and disaster risks: - IMF research suggests natural disasters could subtract around 0.2 percentage point each year from Fiji’s annual GDP growth. - Sea level rise scenarios could range between 0.5 and 1 meter over the course of the century; planned retreat from the coastline may be most cost-effective. - Authorities should mobilize climate financing and improve spending efficiency; the recent IMF Climate PIMA provides recommendations on coordination, alignment of climate objectives with sector investment plans, and vulnerability assessment. - The 2022 National Climate Finance Strategy estimates about FJD 4.3 billion over ten years to strengthen resilience of transport infrastructure (not comprehensively costed for all needs). - Implementation and planning: - NDP implementation booklets (IBs) have been drafted across forty-five government agencies to support next year’s budget consultations and are aligned with the National Infrastructure Investment Plan and Medium-Term Fiscal Framework. - A mid-term review of NDP strategies and IBs is planned for July 2026. - Infrastructure priorities include flood alleviation, energy efficiency, road and bridge networks, wastewater management, and health facilities. - Authorities are considering public-private partnerships and strategic procurement planning to reduce implementation delays. - Climate Finance Strategy being prepared involving 23 line ministries. - Authorities report forty-three communities have requested relocation, with seventeen placed on a priority list and two being relocated. - Combined project proposals exceeding FJD 50 million are being developed to reduce administrative costs; donor budget support utilization is challenged by planning and procurement delays. ### Governance reforms - Good governance is a pillar of the NDP with emphasis on institutional reform, rule of law, and reducing corruption and bribery. - Legislative actions submitted to Parliament include a Code of Conduct bill, an Accountability and Transparency Commission bill (including whistleblower protection), and a Freedom of Information bill. - Effective implementation will require awareness campaigns and addressing civil service capacity constraints, including drafting a manual of standard operating procedures. - Public procurement revisions include provisions for publishing beneficial ownership information for awarded contracts. - The Fijian Independent Commission Against Corruption (FICAC) should focus resources on high-level corruption and build trust in its impartiality. - International technical assistance (including IMF) can support analysis of anti-corruption and rule of law frameworks. *Source: IMF country chapter content provided in the supplied PDF content unit.* ### 36. The authorities underscored the importance of legislative reform to increase ### The authorities underscored the importance of legislative reform to increase ### Legislative reform and anti-corruption - The OAG emphasized that the above-mentioned bills will be key to hold government and public officials accountable in the administration of goods and services. - Key provisions of the bills: - Declaration of assets by public officials. - Creation of an asset register. - Disclosure of government information on request. - FICAC priorities going forward: - Ensure enhanced screening and selectivity in investigations. - Focus on the most serious cases of corruption, whether in terms of amounts involved, prominence of individuals, or public interest. - Capacity constraints noted: - Fiji, as a small developing island state, faces capacity constraints requiring support from international partners. - Support needs include training civil servants in handling requests for information and conducting legal investigations. ### Capacity building - Main capacity challenge: - Lack of capacity in public institutions arising in substantial part from rapid turnover of staff. - Recent Fund technical assistance focused on: - Improving national accounts, price, and external sector statistics at the Fiji Bureau of Statistics. - Developing a forecasting and policy analysis system at the RBF. - Revenue administration. - Priority areas for further improvements (Annex VI and Annex VIII references retained in source): - Public financial management. - Public investment management. - Tax policy and administration. - Debt sustainability. - Monetary operations. - Financial sector supervision. - Improving the quality of CPI, fiscal and external sector data. - Developing quarterly national accounts. - Increasing the Fiji Bureau of Statistics’ capacity. ### Staff appraisal — macroeconomic outlook and risks - Recent trajectory: - The economy has been recovering from the pandemic but is facing new setbacks. - Growth projection: - Growth is expected to fall in 2025, to about 2.6 percent, mostly because of slowing external demand, and to take a couple of years to recover to its medium-term potential rate. - External and fiscal implications: - The baseline projection implies that public debt would remain elevated. - FX reserve coverage would fall, implying that the external position remains moderately weak. - Risks: - Growth would be higher with successful structural reforms, or should the external environment be more favorable than assumed. - The balance of risks appears to be mostly to the downside: - Near term: if trade tensions were to worsen or their effects be more severe than assumed in the baseline. - Medium term: vulnerabilities to natural disasters. ### Policy recommendations - Fiscal policy: - Focus on lowering public debt while continuing with growth-friendly fiscal consolidation, oriented toward capital spending. - Additional adjustment measures are needed to put public debt on a clear downward path. - Use targeted and temporary social protection measures to protect the vulnerable. - Fiscal tightening would also contribute to reducing external imbalances. - Monetary policy: - Over the medium term, given potential pressures on the exchange rate peg, monetary conditions should be gradually tightened, raising the policy rate and reducing excess liquidity. - Financial policy: - Be attentive to emerging credit risks and safeguard against money laundering risks. - Exchange rate and capital account management: - Authorities should avoid using exchange rate restrictions and CFMs in place of macroeconomic adjustment. - Focus on a gradual, sequenced capital account liberalization to support high long-run growth objectives. ### Raising potential growth and structural reforms - Short- and medium-term priorities: - Address ageing infrastructure in electricity, water, and waste utilities. - Improve the transport network and digital connectivity. - Address training and human capital constraints. - Expected benefits of successful measures: - Encourage more foreign investment. - Ease external imbalances. - Reduce “brain drain.” - Climate and disaster resilience: - Fiji faces ongoing challenges from natural disasters and climate change; increasing resilience motivates a shift toward capital spending. ### Governance and implementation - Importance of sustained political consensus and good governance: - Government recognition of the importance of institutional reform, commitment to the rule of law, and reducing corruption and bribery is welcome. - Recent legislative progress will need to be matched by proper enforcement and addressing capacity constraints in the civil service. *FIJI — INTERNATIONAL MONETARY FUND* ### 43. It is recommended that the next Article IV consultation take place on the standard 12- ### 1fjiea2025001-print-pdf - 43. It is recommended that the next Article IV consultation take place on the standard 12- ### Recent developments and macro outlook - It is recommended that the next Article IV consultation take place on the standard 12-month cycle. - Growth and inflation - Real GDP growth: 2022 = 19.8; 2023 = 7.5; 2024 = 3.7; 2025 = 2.6; 2026 = 2.8; 2027 = 3.2; 2028 = 3.2; 2029 = 3.2; 2030 = 3.2 (percent change). - GDP deflator: 2022 = 2.4; 2023 = 4.1; 2024 = 6.3; 2025 = 3.2; 2026 = 3.1; 2027 = 3.2; 2028 = 3.3; 2029 = 3.4; 2030 = 3.5 (percent change). - Consumer prices (average): 2022 = 4.3; 2023 = 2.3; 2024 = 4.5; 2025 = 3.2; 2026 = 3.1; 2027 = 3.2; 2028 = 3.3; 2029 = 3.4; 2030 = 3.5 (percent change). - Consumer prices (end of period): 2022 = 3.1; 2023 = 5.1; 2024 = 1.3; 2025 = 3.1; 2026 = 3.2; 2027 = 3.3; 2028 = 3.4; 2029 = 3.5; 2030 = 3.5 (percent). - Labor market and tourism - Tourist arrivals from Australia, New Zealand, and the US in 2024 surpassed pre-pandemic levels; tourism earnings rebounded to pre-pandemic levels (figures show strong monthly visitor counts and tourism earnings in FJD). - Labor market tightened due to economic recovery and outward migration; female labor force participation has remained low (labor force participation rate series by gender shown). - Monthly job ads and growth and broad indicators show recovery in employment demand (monthly indices and y/y changes presented). ### Fiscal sector indicators and public finances - Central government budget on fiscal-year basis (percent of GDP) - Government Revenue and Grants: 2022 = 21.4; 2023 = 23.2; 2024 = 27.4; 2025 = 27.1; 2026 = 27.1; 2027 = 26.8; 2028 = 26.8; 2029 = 26.6; 2030 = 26.5. - Expenditure: 2022 = 33.5; 2023 = 30.3; 2024 = 31.0; 2025 = 31.5; 2026 = 31.3; 2027 = 31.1; 2028 = 31.0; 2029 = 30.9; 2030 = 30.9. - Overall balance: 2022 = -12.1; 2023 = -7.2; 2024 = -3.5; 2025 = -4.4; 2026 = -4.2; 2027 = -4.2; 2028 = -4.2; 2029 = -4.3; 2030 = -4.4. - Primary balance: 2022 = -8.5; 2023 = -3.3; 2024 = 0.5; 2025 = -0.3; 2026 = -0.3; 2027 = -0.6; 2028 = -0.6; 2029 = -0.7; 2030 = -0.8. - Central government debt (percent of GDP) - 2022 = 90.4; 2023 = 83.3; 2024 = 79.5; 2025 = 77.7; 2026 = 77.7; 2027 = 77.6; 2028 = 77.4; 2029 = 77.0; 2030 = 76.8. - Central government external debt (percent of GDP): 2022 = 33.3; 2023 = 30.6; 2024 = 28.7; 2025 = 26.5; 2026 = 26.5; 2027 = 26.4; 2028 = 26.1; 2029 = 25.8; 2030 = 25.6. - Composition and trends (selected 2022–24 levels in FJD millions) - Government revenue: 2022 = 2,332; 2023 = 3,045; 2024 = 3,837. - Tax revenue: 2022 = 2,003; 2023 = 2,526; 2024 = 3,244. - Government expenditure: 2022 = 3,460; 2023 = 3,599; 2024 = 4,153. - Primary expenditure: 2022 = 3,061; 2023 = 3,101; 2024 = 3,626. - Capital expenditure (percent of GDP): historical averages compared—Average Capital Primary Expenditure 2009-13 = 6.3% of GDP; Average Capital Primary Expenditure 2014-19 = 10.2% of GDP; 2024 shown below pre-pandemic trends in figures. ### External sector and balance of payments - Current account and components (percent of GDP) - Current account balance: 2022 = -17.3; 2023 = -7.7; 2024 = -6.7; 2025 = -7.0; 2026 = -7.7; 2027 = -7.5; 2028 = -7.2; 2029 = -6.9; 2030 = -6.9. - Trade balance: 2022 = -32.9; 2023 = -32.7; 2024 = -30.0; 2025 = -29.1; 2026 = -27.7; 2027 = -27.3; 2028 = -27.3; 2029 = -26.9; 2030 = -26.4. - Services balance (percent of GDP): 2022 = 11.8; 2023 = 20.4; 2024 = 20.0; 2025 = 19.9; 2026 = 18.4; 2027 = 17.8; 2028 = 17.3; 2029 = 17.1; 2030 = 16.5. - Primary income balance: 2022 = -5.3; 2023 = -5.7; 2024 = -6.4; 2025 = -6.8; 2026 = -6.6; 2027 = -6.4; 2028 = -6.0; 2029 = -5.9; 2030 = -5.9. - Secondary income balance: 2022 = 9.2; 2023 = 10.3; 2024 = 9.6; 2025 = 9.0; 2026 = 8.2; 2027 = 8.5; 2028 = 8.8; 2029 = 8.9; 2030 = 9.0. - Balance of Payments (in millions of US dollars, selected) - Current account (USD): 2022 = -861; 2023 = -417; 2024 = -399; 2025 = -441; 2026 = -504; 2027 = -516; 2028 = -525; 2029 = -526; 2030 = -561. - Trade balance (USD): 2022 = -1,633; 2023 = -1,779; 2024 = -1,782; 2025 = -1,822. - Exports, f.o.b. (USD): 2022 = 1,055; 2023 = 1,067; 2024 = 1,119; 2025 = 1,139. - Imports, f.o.b. (USD): 2022 = 2,688; 2023 = 2,846; 2024 = 2,902; 2025 = 2,961. - Services (net, USD): 2022 = 587; 2023 = 1,112; 2024 = 1,192; 2025 = 1,244. - Tourism receipts (percent of GDP series noted): tourism receipts show a strong rebound driven by Australia, New Zealand, USA visitor inflows. - Reserves and external debt - Gross official reserves (in millions of US dollars): 2022 = 1,548; 2023 = 1,533; 2024 = 1,441; 2025 = 1,294; 2026 = 1,129; 2027 = 998; 2028 = 965; 2029 = 936; 2030 = 894. - Gross official reserves (in months of prospective imports): 2022 = 5.5; 2023 = 5.3; 2024 = 5.2; 2025 = 4.4; 2026 = 3.7; 2027 = 3.1; 2028 = 2.9; 2029 = 2.6; 2030 = ... - External debt (percent of GDP): 2022 = 55.0; 2023 = 54.5; 2024 = 51.7; 2025 = 51.9; 2026 = 51.9; 2027 = 51.5; 2028 = 50.9; 2029 = 50.3; 2030 = 49.3. ### Monetary and financial sector indicators - Monetary policy and money - RBF Policy rate (end-period): 2021 = 0.25; 2022 = 0.25; 2023 = 0.25; 2024 = 0.25. - Monetary base (end period, FJD millions): 2021 = 3,930; 2022 = 4,552; 2023 = 4,372; 2024 = 4,574; 2025 = 4,731; 2026 = 4,788. - Broad money (M3, end period, FJD millions): 2021 = 9,749; 2022 = 10,244; 2023 = 11,176; 2024 = 12,047; 2025 = 12,541; 2026 = 13,061. - Claims on private sector (FJD millions): 2021 = 8,054; 2022 = 8,594; 2023 = 9,243; 2024 = 10,294; 2025 = 11,323; 2026 = 12,229. - Claims on private sector to GDP (percent): 2021 = 90.4; 2022 = 78.6; 2023 = 75.5; 2024 = 76.3; 2025 = 78.6; 2026 = 79.7. - Interest rates (end-period) - Commercial banks deposits rate: 2021 = 0.5; 2022 = 0.4; 2023 = 0.4; 2024 = 0.3 (weighted average, end of period). - Interest rates on time deposits (end of period): 2021 = 3.1; 2022 = 1.2; 2023 = 1.4; 2024 = 1.7 (weighted average, end of period). - Lending rates (end of period): 2021 = 6.1; 2022 = 5.2; 2023 = 4.8; 2024 = 4.6 (weighted average, end of period). - Banking sector soundness (selected ratios) - Capital Adequacy (Risk Weighted CAR): 2019 = 18.5; 2020 = 19.7; 2021 = 21.1; 2022 = 21.3; 2023 = 18.1; 2024 = 16.9 (percent). - Tier 1 Capital to RWA: 2019 = 15.5; 2020 = 16.6; 2021 = 17.8; 2022 = 17.2; 2023 = 14.9; 2024 = 14.1 (percent). - NPLs to Total Loans: 2019 = 3.8; 2020 = 6.2; 2021 = 8.5; 2022 = 8.4; 2023 = 4.8; 2024 = 3.5 (percent). - Provision to NPLs: 2019 = 35.1; 2020 = 40.9; 2021 = 36.1; 2022 = 28.8; 2023 = 33.4; 2024 = 33.3 (percent). - Return on Assets: 2019 = 2.7; 2020 = 1.1; 2021 = 1.6; 2022 = 2.6; 2023 = 2.6; 2024 = 2.4 (percent). - Return on Equity: 2019 = 20.6; 2020 = 8.2; 2021 = 11.6; 2022 = 19.9; 2023 = 22.5; 2024 = 21.2 (percent). - Commercial Banks' Capital Adequacy minimum requirement = 12% (figure annotation). ### Key projections and memorandum items - GDP at current market prices (FJD millions): 2022 = 10,940; 2023 = 12,245; 2024 = 13,494; 2025 = 14,286; 2026 = 15,148; 2027 = 16,130; 2028 = 17,193; 2029 = 18,342; 2030 = 19,594. - GDP at current market prices (USD millions): 2022 = 4,970; 2023 = 5,442; 2024 = 5,949; 2025 = 6,257; 2026 = 6,564; 2027 = 6,913; 2028 = 7,284; 2029 = 7,674; 2030 = 8,089. - GDP per capita (USD): 2022 = 5,450; 2023 = 5,933; 2024 = 6,447; 2025 = 6,740; 2026 = 7,030; 2027 = 7,359; 2028 = 7,707; 2029 = 8,072; 2030 = 8,508. *Sources: Reserve Bank of Fiji; Ministry of Finance; Ministry of Economy; and IMF staff estimates and projections.* ### Annex I: Assessing the Growth Impact of Tariffs ### Annex I: Assessing the Growth Impact of Tariffs ### Tariff announcement and immediate terms - On April 2, 2025, the US administration announced tariffs of 32 percent on goods exports. - On April 9, 2025, the administration announced a 90 day “pause”, during which the tariff rate would be 10 percent. - The baseline projections are based on the announced tariffs as of April 2, 2025. ### Importance of US and tourism exposure for Fiji - Goods exports represented 20 percent of nominal GDP in 2024. - The US is the most important export destination: 20 percent (FJD 467 million) of goods exports were sent to the US, indicating that 4 percent of GDP would be subject to tariffs by the US. - Of the US-bound goods exports, two thirds came from mineral water; agricultural and horticultural goods were the next most important category. - Gross tourism receipts were about 40 percent of GDP in 2024. - Visitor shares by market: Australia 46 percent, New Zealand 23 percent, US 11 percent. ### Quantified growth impacts and scenario calculations - Staff estimate: direct and indirect effects from the tariffs would likely subtract about 0.4 percentage points from growth in the near term. Effects are assumed to be solely to the level of GDP, with no permanent damage to growth rates. - Baseline and computed paths (selected values from Annex I table): - AIV baseline growth rate (row 1): 2024 = 3.7, 2025 = 3.0, 2026 = 3.2, 2027 = 3.2. - Baseline level (row 2): 2024 = 100.0, 2025 = 103.0, 2026 = 106.3, 2027 = 109.7. - Tariff direct effect — shock (share of GDP) (row 3): 2024 = 0.000, 2025 = -0.002, 2026 = -0.003, 2027 = -0.003. - Resulting level after direct effect (row 4): 2024 = 100.0, 2025 = 102.8, 2026 = 106.0, 2027 = 109.4. - Growth rate after direct effect (row 5, percent): 2024 = 0.00, 2025 = 2.78, 2026 = 3.13, 2027 = 3.20. - Tariff indirect effect — shock (share of GDP) (row 6): 2024 = 0.0, 2025 = -0.002, 2026 = -0.002, 2027 = -0.002. - Resulting level after indirect effect (row 7): 2024 = 100.0, 2025 = 102.6, 2026 = 105.8, 2027 = 109.1. - Growth rate after indirect effect (row 8, percent): 2024 = 0.00, 2025 = 2.59, 2026 = 3.11, 2027 = 3.18. - Judgment shock (level, gdp) applied for persistent effects (row 9): 2024 = 0.0, 2025 = 0.0, 2026 = -0.3, 2027 = -0.3. - Level after judgment (row 10): 2024 = 100.0, 2025 = 102.6, 2026 = 105.5, 2027 = 108.8. - Growth rate after judgment (row 11, percent): 2024 = 0.00, 2025 = 2.59, 2026 = 2.82, 2027 = 3.19. - Revised growth (row 12): 2024 = 2.6, 2025 = 2.8, 2026 = 3.2. - Revised GDP path (row 13): 2024 = 100, 2025 = 102.6, 2026 = 105.5, 2027 = 108.8. - Breakdown of near-term impact: - Direct effects imply a loss of about 0.2 percentage points of growth in 2025 (from tariff direct effect). - Indirect effects (including tourism and trading partner demand) imply a further subtraction of about 0.2 percentage points from growth in 2025. - Combined, the revised path is 0.4 percentage points lower in 2025 and 2026, returning to potential growth by 2027. - The path implies a cumulative output loss of about 1 percentage point by 2027. ### Uncertainty, downside and upside risks - Downside risks: - More elastic price responses to tariffs and larger income effects (e.g., discretionary tourist cancellations) could reduce growth rates by about another 0.4 percentage point in 2025. - If the tariffs were to have a larger (about twice) negative effect on trading partner countries, that would take off a further one third of a percentage point, lowering growth in 2025 to 1.7 percent. - Upside risks: - Easing tariff tensions could raise growth back to the “pre-tariff” projection of 3.0 percent for 2025. ### Policy responses and staff judgement applied - Staff applies judgement to account for persistent effects from global trade uncertainty and production and capital reallocation when adjusting 2026 levels. - Recommended policy responses reflected elsewhere in staff analysis of trade shocks and external risks (as applicable to mitigate tariff impacts): - Targeted fiscal support as needed to most-affected groups while watching public debt sustainability carefully. - Seek official financing for any additional financing needs. - Fiscal consolidation and tightening of monetary conditions to support FX reserve accumulation and external stability. - Policies to foster export diversification and productivity-raising private investment to reduce vulnerability to trade shocks and strengthen medium-term growth potential. *Source: IMF Staff Calculations, Annex I: Assessing the Growth Impact of Tariffs.* ### Annex IV. Table 2. Fiji: Debt Coverage and Disclosures ### Annex IV. Table 2. Fiji: Debt Coverage and Disclosures ### Debt coverage and consolidation - Debt coverage in the DSA: 1/CGGGNFPSCPSOther - If central government, are non-central government entities insignificant? No - Chosen perimeter: central government (coverage in Fiji's SRDSF is for the central government). Authorities are making efforts to expand the perimeter of public debt statistics, including for other sub-sectors of the general government and the public sector. The data used for the SRDSF is on a calendar year basis. - Subsectors included in the chosen coverage: - Budgetary central government: Yes - Extra budgetary funds (EBFs): No - Social security funds (SSFs): No - State governments: No - Local governments: No - Public nonfinancial corporations: No - Central bank: No - Other public financial corporations: No - Reporting on intra-government debt holdings and valuation: Not applicable (basis of recording / valuation of debt stock indicated as "Not applicable" in table). - Notes and definitions preserved exactly: - 1/ CG=Central government; GG=General government; NFPS=Nonfinancial public sector; PS=Public sector. - 2/ Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable. - 3/ Insurance, Pension, and Standardized Guarantee Schemes, typically including government employee pension liabilities. - 4/ Includes accrual recording, commitment basis, due for payment, etc. - 5/ Nominal value at any moment in time is the amount the debtor owes to the creditor. - 6/ The face value of a debt instrument is the undiscounted amount of principal to be paid at (or before) maturity. - 7/ Market value of debt instruments is the value as if they were acquired in market transactions on the balance sheet reporting date (reference date). Only traded debt securities have observed market values. ### Public debt structure indicators (Annex IV. Figure 1) - Perimeter shown is central government. - As of end-FY2024: - Nearly two-thirds of public debt is held domestically. - Domestic public debt concentration: FNPF: 65 percent; insurance companies: 14.1 percent; Reserve Bank of Fiji: 10.8 percent; commercial banks: 8.5 percent. - Domestic creditor absorption capacity: - FNPF and insurance companies have the capacity to absorb domestic financing. - Absorption capacity of remaining private financial sector, in particular commercial banks, remains limited. - External public debt held by official creditors, in particular multilateral lenders, with access to concessional terms, longer maturities and grace periods. - Currency composition: A large share held in local currency-denominated instruments. - Instrument and marketability: Marketable instruments account for a large share of public debt and are held by domestic creditors. - Maturity: The share of short-term debt remains small; both domestic and external public debt have an average term to maturity of over 5 years. - Stated average term to maturity: 11.7 years ### Baseline scenario (Annex IV. Table 3) - Public debt (In percent of GDP), Actual and Projections: - Actual 2024: 79.2 - 2025: 78.5 - 2026: 78.6 - 2027: 78.3 - 2028: 78.0 - 2029: 77.6 - 2030: 77.3 - 2031: 76.7 - 2032: 76.1 - 2033: 75.5 - 2034: 74.9 - Change in public debt: - 2024: -2.0 - 2025: -0.7 - 2026: 0.0 - 2027: -0.3 - 2028: -0.3 - 2029: -0.4 - 2030: -0.3 - 2031: -0.6 - 2032: -0.6 - 2033: -0.6 - 2034: -0.6 - Contribution of identified flows: - 2024: -3.4 - 2025: -0.3 - 2026: 0.0 - 2027: -0.2 - 2028: -0.3 - 2029: -0.2 - 2030: -0.2 - 2031: -0.2 - 2032: -0.2 - 2033: -0.2 - 2034: -0.3 - Primary deficit (percent of GDP): - 2024: -0.1 - 2025: 0.4 - 2026: 0.5 - 2027: 0.6 - 2028: 0.6 - 2029: 0.7 - 2030: 0.8 - 2031: 0.8 - 2032: 0.8 - 2033: 0.8 - 2034: 0.8 - Noninterest revenues (percent of GDP): - 2024: 27.0 - 2025: 27.1 - 2026: 27.0 - 2027: 26.8 - 2028: 26.7 - 2029: 26.6 - 2030: 26.5 - 2031: 26.5 - 2032: 26.5 - 2033: 26.5 - 2034: 26.5 - Noninterest expenditures (percent of GDP): - 2024: 26.9 - 2025: 27.4 - 2026: 27.5 - 2027: 27.4 - 2028: 27.4 - 2029: 27.3 - 2030: 27.3 - 2031: 27.3 - 2032: 27.3 - 2033: 27.3 - 2034: 27.3 - Automatic debt dynamics (percent of GDP): - 2024: -3.3 - 2025: -0.7 - 2026: -0.6 - 2027: -0.8 - 2028: -0.9 - 2029: -0.9 - 2030: -1.0 - 2031: -1.1 - 2032: -1.1 - 2033: -1.0 - 2034: -1.0 - Real interest rate and relative inflation: - 2024: 0.3 - 2025: 1.3 - 2026: 1.6 - 2027: 1.6 - 2028: 1.5 - 2029: 1.5 - 2030: 1.4 - 2031: 1.3 - 2032: 1.3 - 2033: 1.3 - 2034: 1.3 - Real interest rate: - 2024: -0.6 - 2025: 1.2 - 2026: 1.4 - 2027: 1.3 - 2028: 1.2 - 2029: 1.1 - 2030: 1.0 - 2031: 0.9 - 2032: 1.0 - 2033: 1.0 - 2034: 1.0 - Relative inflation: - 2024: 1.0 - 2025: 0.1 - 2026: 0.2 - 2027: 0.3 - 2028: 0.3 - 2029: 0.4 - 2030: 0.4 - 2031: 0.4 - 2032: 0.4 - 2033: 0.4 - 2034: 0.3 - Real growth rate: - 2024: -2.9 - 2025: -2.0 - 2026: -2.2 - 2027: -2.4 - 2028: -2.4 - 2029: -2.4 - 2030: -2.4 - 2031: -2.4 - 2032: -2.4 - 2033: -2.4 - 2034: -2.3 - Real exchange rate: - 2024: -0.8 - 2025: 0.0 - 2026: 0.0 - 2027: -0.1 - 2028: 0.0 - 2029: -0.1 - 2030: -0.1 - 2031: -0.7 - 2032: -0.4 - 2033: -0.4 - 2034: -0.3 - Other identified flows: - 2024: 0.0 - 2025: 0.0 - 2026: 0.1 - 2027: 0.0 - 2028: 0.0 - 2029: 0.0 - 2030: 0.0 - 2031: 0.0 - 2032: 0.0 - 2033: 0.0 - 2034: -0.1 - Contribution of residual: - 2024: 1.4 - 2025: -0.4 - 2026: 0.1 - 2027: 0.0 - 2028: 0.0 - 2029: -0.2 - 2030: -0.1 - 2031: -0.4 - 2032: -0.4 - 2033: -0.4 - 2034: -0.3 - Gross financing needs (percent of GDP): - 2024: 7.9 - 2025: 8.1 - 2026: 7.6 - 2027: 7.1 - 2028: 7.4 - 2029: 7.8 - 2030: 7.6 - 2031: 6.6 - 2032: 6.4 - 2033: 6.6 - 2034: 6.9 - Of which: debt service (percent of GDP): - 2024: 8.0 - 2025: 7.8 - 2026: 7.1 - 2027: 6.5 - 2028: 6.8 - 2029: 7.1 - 2030: 6.8 - 2031: 5.8 - 2032: 5.6 - 2033: 5.8 - 2034: 6.0 - Debt service by currency (percent of GDP): - Local currency: 2024: 5.7; 2025: 5.5; 2026: 4.6; 2027: 4.1; 2028: 4.5; 2029: 4.9; 2030: 4.7; 2031: 3.9; 2032: 3.6; 2033: 3.7; 2034: 4.0 - Foreign currency: 2024: 2.4; 2025: 2.3; 2026: 2.5; 2027: 2.4; 2028: 2.3; 2029: 2.2; 2030: 2.1; 2031: 1.9; 2032: 2.0; 2033: 2.1; 2034: 2.1 - Memo: - Real GDP growth (percent): 2024: 3.7; 2025: 2.6; 2026: 2.8; 2027: 3.2; 2028: 3.2; 2029: 3.2; 2030: 3.2; 2031: 3.2; 2032: 3.2; 2033: 3.2 - Inflation (GDP deflator; percent): 2024: 6.3; 2025: 3.2; 2026: 3.1; 2027: 3.2; 2028: 3.3; 2029: 3.4; 2030: 3.5; 2031: 3.5; 2032: 3.5; 2033: 3.5 - Nominal GDP growth (percent): 2024: 10.2; 2025: 5.9; 2026: 6.0; 2027: 6.5; 2028: 6.6; 2029: 6.7; 2030: 6.8; 2031: 6.8; 2032: 6.8; 2033: 6.8 - Effective interest rate (percent): 2024: 5.4; 2025: 4.8; 2026: 5.0; 2027: 4.9; 2028: 5.0; 2029: 4.9; 2030: 4.9; 2031: 4.8; 2032: 4.8; 2033: 4.9 - Commentary summary: The public debt-to-GDP ratio is projected to decline marginally over the medium-term, reflecting the positive GDP growth-interest rate differentials offset by small, persistent primary deficits. ### Realism of baseline assumptions (Annex IV. Figure 2) - Realism analysis indicates: - Past forecast errors do not reveal systematic biases. - Projected debt path is within norms, although the projected fiscal adjustment is in the top 25 percent of the cross-country database. - The increase in the debt-to-GDP ratio in the past five years mainly reflects the impact of the pandemic on GDP growth and primary deficits. - The marginal decline in the next five years is projected to be mainly driven by positive GDP growth-interest rate differentials and relatively lower primary deficits. - Bond issuance plans: authorities plan to continue to primarily issue longer-term debt domestically. - Projected reduction in the debt-to-GDP ratio is marginal in comparison with cross-country experience and Fiji's historical experience. - Following the temporary decline in FY2024, the primary deficit is projected to increase, consistent with cross-country and Fiji’s historical experience. ### Medium-term risk assessment (Annex IV. Figure 3) - Debt fanchart module: - Value: 76.6 - Contribution: 1.1 (percent of GDP) - Fanchart width: 41.1 - Probability of debt non-stabilization (percent): 0.3 - Terminal debt-to-GDP x institutions index: 41.9 (contribution 0.9) - Debt fanchart index (DFI): 2.4 - Risk signal: High (per table thresholds) - Gross financing needs (GFN) module: - Average baseline GFN (percent of GDP): 7.6 - Initial banks' claims on the general govt (pct bank assets): 3.6 - Change in banks' claims in stress (pct banks' assets): 1.7 - GFN financeability index (GFI): 4.3 - Risk signal: Low (per table thresholds) - Medium-term index: - Debt fanchart index contribution: 2.4 - GFN financeability index contribution: 4.3 - Final assessment: Moderate risk - Probabilities and diagnostic metrics: - Prob. of missed crisis, 2025-2030, if stress not predicted: 18.2 pct. - Prob. of false alarms, 2025-2030, if stress predicted: 26.1 pct. - Commentary summary: Debt Fanchart Module points to high risk, while the GFN Financeability Module suggests a low level of risk. The final assessment is moderate risk. The modules reflect high volatility of the debt path, large financing needs, and limited fiscal buffers amidst elevated debt levels and Fiji's high vulnerability to shocks. The stress scenario includes natural disaster shocks and materialization of contingent liabilities, which notably impact gross financing needs and the debt-to-GDP ratio. - Contingent liabilities (based on FY2024 Annual Debt Report): - Government guarantees to SOEs: 7.7 percent of GDP - Other explicit and implicit contingent liabilities (including provincial and municipal councils’ debt): 4.9 percent of GDP ### Triggered modules — Climate change: Adaptation (Annex IV. Figure 4) - Commentary: Fiji remains vulnerable to climate-related risks. - Scenario outcome: Large investment needs for climate adaptation could increase the public debt-to-GDP ratio to more than 80 percent over the long run. - Policy implications: Fiscal reforms and access to concessional financing will be critical for financing climate adaptation investments. Undertaking such investments can help increase the economy's resilience to climate risks over the long run. - Displayed indicators (time series projections shown in figures): GFN-to-GDP Ratio and Total Public Debt-to-GDP Ratio under baseline (extension of fifth projection year) and "With climate adaptation (standardized scenario)." ### Implementation of past Article IV recommendations (Annex V) — Selected findings - Implementing a comprehensive tax reform strategy that raises revenue: - Notable progress. The FY2024 budget included revenue-enhancing measures, including increases in VAT, CIT, and departure tax. The FY2025 budget further increased departure tax to pre-pandemic levels starting August 2025. - Reorientation of expenditure that promotes growth, resilience, and inclusion: - Some progress. Recent budgets prioritized spending on social protection and infrastructure. Targeting of transfers and execution of capital expenditure need enhancement. PSIP guidelines for new capital projects was approved. - Improving public financial management and fiscal transparency: - Some progress. Public guarantees for certain SOEs have been reduced, but the total size remains broadly unchanged. Certain SOEs have made progress in publishing their annual reports. Procurement regulations are being revised. A new Financial Management Information System was implemented. - Gradually unwinding accommodative monetary policy stance: - Limited progress. The RBF has withdrawn liquidity support through its lending facilities, but the policy rate remains unchanged. - Reverse pandemic-related capital flow management measures (CFMs) and phase out current account exchange restrictions: - Some progress. Limits increased on deposits into FJD external accounts, payments of oil imports, loan repayments, investment withdrawals, and profit repatriation. Exchange restrictions related to limits on large payments and tax clearance certification requirements and CFMs on offshore investment by individuals remain in place. - Strengthening financial regulation and supervision: - Some progress. Authorities are reviewing the Banking Act and RBF Act. - Strengthening AML/CFT framework: - Some progress. In June 2024, the Cabinet approved the National ID e-KYC functionality. Measures include development of a new counter-terrorism law and completion of a risk assessment for the non-profit organization sector. - Continuing to enhance financial inclusion: - Some progress. RBF onboarded Mobile Network Operators into its central infrastructure, enabling full interoperability for account-based transfers between commercial banks and digital wallets. - Adopt and operationalize a carefully prioritized growth strategy: - Some progress. A National Development Plan has been published. It provides a roadmap to achieve a 5 percent growth rate by 2030 and is being costed and implemented. - Improving competitiveness and business environment: - Some progress. Processing of new worker and investor permits has been accelerated. Bottlenecks in utility services need to be addressed. - Accelerate implementation of plans to enhance resilience to climate shocks: - Some progress. Authorities are developing combined project proposals to reduce administrative constraints and preparing a Climate finance Strategy. Adaptation projects are focusing on relocation of coastal communities and construction of seawalls. ### Country engagement strategy (Annex VI) — Key points - Fiji faces several developmental challenges to ensure a sustainable increase in living standards and resilience (¶1). Authorities have worked closely with the IMF and other development partners in formulating growth-oriented strategies. - The 2025-2029 National Development Plan (NDP) sets medium-term objectives: increase economic resilience; empower people; improve governance; build economic stability; manage natural resources; raise growth and diversification; improve socioeconomic wellbeing (poverty reduction, healthcare, education, training, housing); develop public infrastructure and environment; and institutional reforms. - Initial NDP priorities: improving access to clean drinking water; improving drainage; upgrading rural roads; increasing access to healthcare. - Authorities are also addressing outstanding vulnerabilities within Fiji’s AML/CFT framework, enhancing financial infrastructure, and improving the effectiveness of monetary policy operations and financial supervision. - Challenges to progress: - Increasing frequency and intensity of natural disasters and climate change-related issues. - Recent rise in outward migration creating capacity constraints and straining resources and public services. - Pressing financing needs for development initiatives requiring innovative funding solutions. - External factors: geopolitical fragmentation and changes in the global regulatory environment may have knock-on effects. *Source: 1fjiea2025001-print-pdf - Annex IV. Table 2. Fiji: Debt Coverage and Disclosures* ### 4. The IMF’s engagement with Fiji will encompass both surveillance and capacity ### 4. The IMF’s engagement with Fiji will encompass both surveillance and capacity development (CD) ### IMF engagement: objectives and coordination - Engagement will encompass both surveillance and capacity development (CD) to support the authorities’ priorities while fully collaborating with DPs. - Key thematic areas of engagement: Potential growth, Fiscal policy, Monetary policy and financial supervision, Climate adaptation and mitigation, and Data. - Staff will coordinate with other DPs with expertise in these areas, including the WB and ADB. ### Potential growth - Focus: policies to promote diversification beyond tourism and overcome structural challenges that impede growth. - Key priorities: filling the skills gap left by migration, attracting FDI, and scaling up public and private investment. - Coordination: Staff will coordinate with DPs with expertise in these areas, including the WB and ADB. ### Fiscal policy - IMF, through PFTAC, assisted Fiji in revising its Charts of Accounts (CoA) and implementing a new FMIS, including climate and gender tagging and alignment with the Government Finance Statistics Manual. - PFTAC support continues for assessing tax policy and tax expenditures and improving revenue administration. - Staff assisted Fiji in expanding fiscal risk analysis to include quantitative assessments of climate risks, macroeconomic shocks, and risks from government guarantees to SOEs. - Authorities are building on this progress to formulate additional areas for reform in the Medium-Term Fiscal Strategy. ### Monetary policy and financial supervision - Surveillance and CD will assist with modernization and effectiveness of the monetary policy framework and liquidity management, and aim to strengthen supervisory frameworks and regulatory capabilities for the financial sector. - With Fund support, the authorities are reviewing the Fiji Banking Act and the Credit Union Act. - Progress is being made on addressing remaining recommendations from the 2018 Financial Sector Stability Review (FSSR), including reviewing the RBF Act. ### Climate adaptation and mitigation - Fiji faces substantial investment needs for climate adaptation and mitigation amid increasing natural disasters. - IMF engagement will focus on: financing for adaptation measures; strengthening capacities for effective climate investment; and implementing PFM reforms to integrate climate considerations into budget and project planning. - The government is collaborating with DPs to address climate-related challenges. ### Data: adequacy and CD priorities - Overall: "The data provided to the Fund are adequate for surveillance." - Continued effort to improve data quality could help better assess economic conditions and formulate policies. - IMF CD engagement in data is expected to continue, with follow ups in surveillance. - Specific capacity-development priorities and corrective actions: - Revise the CPI basket and update weights; enhance deflator methodology. - Expand coverage of other sub-sectors of general government and public sector for GFS and public sector debt statistics; update Chart of Accounts mapping to align with international standards. - Consider developing quarterly GDP data. - Noted shortcomings and impacts: - Shortcomings related to national accounts statistics owe to capacity and staffing constraints. - Timeliness: production approach data available with an 8-9 month lag; expenditure approach data with a 12 month lag. - CPI shortcomings: absence of core CPI and lack of breakdown between local and imported inflation; CPI weights and the basket used to deflate nominal GDP are based on 2014 data. - Balance of payments: presence of significant net errors and omissions; publication of 2024 balance of payments data delayed due to revisions to tourism earnings from 2019 onwards (considered one-off). - External debt data on the RBF's National Summary Data Page need updating. - Monetary and financial statistics: generally adequate, but improvements needed in Financial Soundness Indicators coverage, particularly for non-banks. - GFS and public sector debt statistics: coverage limited to budgetary central government; some classification and methodological issues; audited annual financial statements of subnational governments and some public corporations are reported with a delay. - Other data gaps identified: - Need for granular information on climate trends and extreme weather-related events to refine analysis of climate change impacts. - More frequent and comprehensive data on migratory trends to enhance analysis of domestic labor market conditions. - Additional data on inequality, public education and health spending, financial inclusion, and infrastructure quality for better comparisons with other Pacific Island Countries and emerging economies. ### FSSR 2018 outstanding recommendations: status highlights - Review of the Banking Act to identify changes required is in progress; Concept note received from IMF PFTAC; due for further work in 2025. - Papers to address recommendations to strengthen Early Warning Indicators (EWI), bank resolution and recovery processes and procedures are in progress; expected to be finalized in March 2025 but re-prioritized to June 2025. - Enhancements to quantitative analysis on branches' reliance on parent groups are in progress. - Work in progress on legislation/regulations to assign macroprudential authority to the RBF and to develop a detailed macroprudential toolkit; proposed regulations drafted; work expected to proceed in June 2025; confirmation on way forward expected by June 2025. - Strengthening domestic coordination arrangements by establishing a Financial Stability Committee (FSC) — work in progress; scope of RBF Act seen as needing strengthening via regulations. - Assessment of deposit insurance costs and design options: partially completed and on hold; two discussion papers were tabled at the Financial System Policy Committee; a review on stance will take place in 2026 following implementation of crisis management recommendations. - Develop comprehensive bank resolution policies and procedures and establish bank recovery planning requirements: addressed in the EWI/resolution work in progress; papers re-prioritized to June 2025. - Develop ELA policy and processes: papers in progress; expected to be finalized in December 2024 but re-prioritized to September 2025. - Enhance crisis management cross-border coordination with home authorities: papers in progress; expected to be finalized in March 2025 but re-prioritized to June 2025. - Strengthen framework and capacity for early detection of bank stress, early intervention actions, and recovery planning for banks: papers in progress; re-prioritized to June 2025. ### Data adequacy assessment (Annex VIII) - Heatmap median ratings by sector: National Accounts C; Prices C; Government Finance Statistics B; External Sector Statistics B; Monetary and Financial Statistics B; Inter-sectoral Consistency B. - Coverage and frequency/timeliness elements include mixed ratings (examples: Coverage C, Frequency and Timeliness C/B across sectors). - Note: "The data provided to the Fund are adequate for surveillance." and "The data provided to the Fund have some shortcomings but are broadly adequate for surveillance." appear alongside more specific assessments in the text. ### Data Standards and reporting - Fiji participates in the Enhanced General Data Dissemination System (e-GDDS) and publishes data on its National Summary Data Page since September 2018. - Annex VIII tables list frequencies, timeliness, and latest observations for a range of macroeconomic time series (examples include Reserve/Base Money, Broad Money, Central Bank Balance Sheet, Consumer Price Index, Revenue/Expenditure/Balance and Composition of Financing for General Government and Central Government, International Investment Position, Stocks of Central Government and Central Government-Guaranteed Debt, External Current Account Balance, Exports and Imports of Goods and Services, GDP/GNP, Gross External Debt). ### Digital financial inclusion (Annex IX): progress and key indicators - Financial inclusion headline figures (2023p vs Baseline 2020): - Population financially included (formal): 86.5 (2023p); Baseline (2020) 84.0. - NFIS target for 2024: 86.0 percent (target cited). - Population with a regulated savings account: 64.9 (2023p). - Adults with a regulated credit account: 10 (2023p). - Population covered under an insurance policy: 36.6 (2023p). - Population with a superannuation account: 87 (2023p). - Adults with an active mobile money account: 0? (chart label shows 0 but contextual text indicates mobile money usage and growth; preserve chart entry "0"). - Adults making or receiving digital payments other than mobile money: 45.4 (2023p). - Changes in gender gap: reduced from 10.2 percent in 2022 to 9.4 percent in 2023. - Digital payments and mobile money: - Share of adults utilizing digital payments (excluding mobile money) rose from 38.5 percent in December 2022 to 45.4 percent in 2023, surpassing the NFIS interim target of 34.0 percent. - Personal remittances via mobile money operators rose by 36.4 percent over the previous financial year. - Mobile money is the predominant remittance method with a 43.6 percent market share. - Annual statistics show substantial growth in volume and value of digital payments across channels including ATMs, EFTPOS, credit cards, and internet banking. - RBF and National Payment System (NPS) developments: - 2022: upgraded Real Time Gross Settlement System and Central Securities Depository System rolled out. - 2023: Automated Clearing House System launched for bulk and instant electronic fund transfers. - 2024: Mobile Network Operators were integrated into the central payment infrastructure, enabling transfers between banks and digital wallets. - NPS Act 2021, which started in September 2022, supports better licensing and oversight of payment systems. - Work underway to standardize QR codes and improve National ID and electronic Know Your Customer (e-KYC) processes. - Fiji's payment system is fully compliant with the ISO 20222 messaging format. *International Monetary Fund — 4. The IMF’s engagement with Fiji will encompass both surveillance and capacity development (content unit).* ### 4. Challenges and risks: ### 4. Challenges and risks: ### Financial inclusion challenges - Limited connectivity in remote areas constrains access to financial services. - Absence of a national ID and e-KYC system complicates customer onboarding and signing up for services. - Insufficient access points (banks and ATMs), especially in rural and maritime locations. - Low levels of financial and digital literacy hinder uptake and effective use of available services. ### Cybersecurity and operational risks from digitization - Growth in digitized financial services raises the risk of attacks and fraud due to inadequate cybersecurity measures. - Reserve Bank of Fiji (RBF) supervisory response: - Implementing supervisory tools including a comprehensive industry policy focused on minimum cybersecurity management requirements for all supervised entities. - Enhancing surveillance and mitigation of digital risks through these supervisory measures. - Complementary efforts: - RBF collaboration with development and private sector partners to boost digital literacy among customers so users are better equipped to navigate digital financial services safely. ### Expected trajectory for financial inclusion and economic impact - Continued improvements in financial infrastructure (improved connectivity, digital literacy programs, and regulatory support) are expected to accelerate the trend toward increased digital financial services. - Anticipated outcomes include stronger financial inclusion, expanded opportunities for individuals and businesses to engage in the economy, and contributions to sustainable economic growth and resilience in Fiji. ### Climate and natural-disaster risks (Annex X: Accounting for Climate Risks in the Macro-Framework and DSA) - Fiji has witnessed a high frequency of natural disasters; the severity—measured by share of population affected—has risen over time (referenced as Figure 1). - Methodology referenced: - Lee et al (2018) and Lim and Zhou (2025) estimate annual adjustments to baseline real GDP growth projections for Pacific Island countries based on the probability of a natural disaster in a given year and the average impact per natural disaster. - Estimated adjustment for Fiji: - Annual adjustment to real GDP growth projections in the range of 0.13-0.22 ppts. - These estimated effects are smaller than for many other Pacific Island economies (for example, Tonga, Tuvalu, and Vanuatu). - Cumulative impact over time: - National income estimated to be about 6 percent lower after 30 years than without regular setbacks from natural disasters (referenced as Figure 2). ### Debt and fiscal implications - Accounting for lower GDP levels due to recurrent disasters results in higher debt ratios, all else equal. - Public debt under the alternate (disaster-adjusted) growth scenario shows an upward trend over the longer-term horizon (referenced as Figure 3). - Implication: - Results suggest long-run benefits from early implementation of adaptation measures to natural disasters, particularly if implemented earlier rather than later. ### Key statistics and time horizons (preserved exactly from source) - Estimated annual adjustment to real GDP growth projections: 0.13-0.22 ppts. - Cumulative national income lower by: 6 percent after 30 years. *Source: 1fjiea2025001-print-pdf - 4. Challenges and risks:* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1fjiea2025001-print-pdf.pdf_